nikkei 225 daily outlook wed 02 mar 2016 expected bullish breakout now watch the 16480200 support 17

(Click to enlarge charts)

What happened yesterday

The Japan 225 (proxy for the Nikkei 225 futures) has managed to stage a rebound above the short-term range support at 15540 and hit our expected upside target (range top) at 16500.

Please click on this link for a recap on our previous daily outlook/strategy

Key elements

• Since the start of the week, we have highlighted in our weekly technical outlook/strategy that the Index is in the midst of undergoing the second phase of the countertrend rally despite being trapped in a short-term range configuration (click here). Yesterday, price action seen in the U.S. session has reinforced our medium-term bullish bias through the bullish breakout of the range top at 16500 which is also the upper boundary of the descending channel in place since 18 December 2015 high.
• The pull-back support zone of the bullish descending channel breakout now rests at 16480/200 which is also the former range top from 16 February 2016 high.
• Based on the Elliot Wave Principal, the Index is now undergoing a bullish wave sequence of a minor degree (multi-days) which consists typically a set of 5 waves labelled (1,2,3,5) that started from 24 February 2016 low @11pm. Current price action is now forming the wave 3 upleg with a potential target set at 17465 defined by 1.1618 Fibonacci projection of the length of wave 1 projected from the low of wave 2 (yesterday low of 15854.
• The above mentioned expected wave 3 target of 17465 also confluences closely with the upper boundary of the bullish ascending channel in place since the start of the countertrend rally, 12 February 2016 low.

Key levels (1 to 3 days)

Pivot (key support): 16480/200

Resistances: 17100 & 17465

Next support: 15900

Conclusion

As long as the 16480/200 short-term pivotal support holds, the Index is likely to maintain its bullish tone for a further potential rally to target 17100 before 17465.

However, a break below 16480/200 pivotal support is likely to put the bulls on hold again for a pull-back towards the lower boundary of the ascending channel from 12 February 2016 low at 15900.

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